WOULD YOU The OC&C Retail TRUST A Proposition Index MACHINE?2013 An OC&C Insight Taking on the Machines<#> WOULD YOU TRUST A MACHINE? THE OC&C PROPOSITION INDEX 2013 This is the fourth year of the OC&C Proposition Index, a major piece of consumer research into shopper attitudes towards the world’s leading retailers. Consumers are asked WINNER to rate the retailers they have shopped on the strength of OVERALL their overall proposition, and then to score the key elements PROPOSITION of that proposition (Price, Range, Service, etc). The results are then used to compile a ranking of consumers’ favourite retailers from across the globe. The OC&C Proposition Index continues to grow, this year capturing 300,000 ratings from over 30,000 consumers 2ND PLACE 3RD PLACE OVERALL OVERALL regarding nearly 600 retailers across 9 countries. This PROPOSITION PROPOSITION combination of breadth and depth gives a powerful view into the relative strength of retail propositions across the world. Virtual Reality Check It is no longer a surprise that Amazon stands In Germany, Amazon’s second largest global Germany Germany YoY atop our global index. In 2010, when we market and historically its strongest territory 2013 2012 Change released the first OC&C Proposition Index, in the OC&C Proposition Index, its crown has Rank Rank in Rating there was genuine shock in some quarters very much slipped. Recent labour disputes that an online player had already usurped with warehouse workers and subsequent Overall Rating 2 1 -8 large household names as the world’s strikes have tainted the company’s Low Prices 12 6 -5 favourite retailer. Since then Amazon’s relationship with consumers. In 2012 Amazon annual revenues have doubled to over was the top retailer in Germany across the Quality of Products 6 1 -6 $60bn and its stranglehold on the hearts and vast majority of proposition elements (only Wide Choice of minds of consumers has grown ever-tighter. losing out on low prices). However 12 months 11-5 Amazon consistently tops the index across on it has lost its leadership in all of those areas Products Products That are multiple markets (this year the UK, US and other than breadth and relevance of choice. 1 1 -4 France) and in multiple proposition elements Suited to Me This is a significant change. Of particular note (Choice, Value for Money and Trust). Service 2 1 -4 is the impact on Amazon’s trust rating. Trust However, even the great it seems are not has historically proven to be the most Store Look & Feel 4 1 -5 infallible. Amazon has lost its global important factor in driving overall consumer leadership on service and on look and feel, perception of a retailer and has long been a Value For Money 2 1 -5 in both cases being replaced by store-led core strength of Amazon’s across multiple retailers evincing a more traditional markets. Amazon’s recent experience in Trust 6 1 -9 ‘human’ element in these areas (John Germany shows how fragile Trust can be and Lewis in service and Polish jeweller Apart the impact it can have across consumer Rate Online 1 1 -6 in store environment). perceptions of a whole proposition. Losing Trust Amazon Change in Trust Rating by Market Germany and also in the UK Amazon has lost The contrast with its home market is stark, Germany -8 its trust leadership. The impact of recent with Amazon scoring above average in both negative publicity can be seen in both markets: areas in the US despite its use of regulatory UK -6 in Germany Amazon’s attitude through its loopholes to avoid Sales Tax in all but 12 of France -2 recent labour woes has been reflected in the 50 states (admittedly, this is a tactic China -2 consumers views of it as a ‘Fair & Ethical’ that directly benefits the consumer which US -1 retailer, with Amazon Germany registering the helps support positive sentiment). These second lowest score globally in this area, differing perceptions, coupled with Netherlands -1 above only Kik (the German discounter closely complaints in Germany about Amazon tied to recent factory disasters in Bangladesh); attempting to “import American-style Germany is not the only market where in the UK widely publicised criticisms of business practices that stand at odds with Amazon is facing Trust challenges. While Amazon’s tax avoidance program have had a European norms” with regard to their overall Amazon remains the world’s most clear impact on sentiment with UK consumers attitude to unions, serve to highlight some trusted retailer, a position that has been built rating Amazon lower than any other retailer in of the cultural challenges facing retailers as up through exceptional Delivery on Promise the world in terms of ‘Paying Fair Taxes’, they try to internationalise – a theme we and a consistently reliable pricing policy, in scoring 20% below its closest rival. will return to later. 01 An OC&C Insight Would You Trust a Machine? Amazon Trust Elements Ratings by Country (Difference to Global Average) Retailer Is Retailer Delivers Retailer Fair Safe and Reliable Retailer Pay Retailer Charges Retailer Around On My Side Promises and Ethical Products Fair Tax Fair Price Long Time US 8 14 8 99 3 1414 6 France 3 8 -2 66 -7 88 4 UK 1 12 -1 77 -22 1010 3 Germany 5 8 -14 55 -6 66 -7 China 7 6 – 4 – 66 5 Poland 4 6 4 3 3 55 4 Netherlands -1 -0 -5-5 -2 -5-7 2 2 Amazon is not the only retailer to face There have been other high-profile case with the Federal Trade Commission Trust challenges in 2013. Across the index contributions to declines in Trust: in after admitting to using real fur in certain some retailers have seen large declines in January the UK’s Play.com (now part of artificial fur products. Public relations faux- overall trust rating. Leading these are DFS, Rakuten) announced that they would be pas can have a large impact on a retailer’s the UK furniture retailer, Zappos and withdrawing from direct retail following the trust ratings. The largest such incident of Play.com. Zappos’ decline is striking, closure of a tax loophole by the UK the year, Tesco’s much publicised supply having ranked 4th overall in the index on government and operating solely as a chain troubles, also had a large impact on Trust last year. At that time Zappos was in marketplace for other merchants going the retailer’s trust rating, which was down 5 the recent aftermath of a security breach forward; in March Neiman Marcus settled a points from 2012. that resulted in the loss of 24 million customers’ data, but were receiving praise Largest Trust Declines 2013 for handling the breach quickly and Geographies 2013 effectively. However the impact of that Retailer 2013 Trust Score Difference breach has dragged on, with customers DFS UK 59.4 -8 required to change their security details Zappos US 77.5 -8 and some bringing a class action law suit Play.com UK 71.6 -8 against Zappos for losing their data which Zappos tried (and failed) to block relying Biedronka (JMD) Poland 69.1 -7 on the terms of their user agreement. Neiman Marcus US 68.4 -7 The Human Touch OC&C PROPOSITION INDEX – TOP 20 RETAILERS Looking down the top 20 in the OC&C Strongest Weakest Proposition Index reconfirms the importance Rank Company Category Country Area Area Score¹ Chg² 1 Amazon Gen Merch US FR UK DE Choice Low Prices 88.6 -4.3 of Trust; seven of the top 10 retailers on trust CN NL PL find themselves in the top 20 overall. 2 DM Health & Beauty DE Choice Online 87.2 -1.3 However, there are other characteristics that 3 Picard Grocery FR Quality Low Prices 86.0 -3.6 are also well represented. In particular, the 4 Yves Rocher Health & Beauty FR Trust Low Prices 85.8 1.2 top 20 is strongly weighted towards retailers delivering well against some of the more 5 Costco Club US Quality Service 85.3 -0.3 traditional elements of a retail proposition: 6 Trader Joes Grocery US Quality Low Prices 84.9 -1.7 consistent quality, good levels of service and 7 Apple Electricals US UK FR Quality Low Prices 84.8 0.3 an appealing store environment. The likes of 8 John Lewis Department Stores UK Quality Low Prices 84.6 -2.7 Apart, Publix, Apple, Douglas and John Lewis 9 newegg Electricals US Choice Service 84.2 3.6 are reminding us of the value of edited choice coupled with strong merchandising 10 Douglas Health & Beauty DE PL NL FR Choice Low Prices 84.1 2.3 and attention to detail in store fit out, and 11 Thalia Entertainment DE Choice Low Prices 84.0 -0.5 the power of attentive, knowledgeable staff 12 L.L.Bean Apparel US Quality Low Prices 84.0 – in-store. The consumer is rewarding these 13 Cultura Entertainment FR Choice Low Prices 83.8 0.6 retailers for investing in what matters to deliver a better overall customer experience. 14 Publix Grocery US Look & Feel Low Prices 83.8 – 15 Vente-privée Apparel FR Quality Service 83.7 -0.3 16 Bath and Body Works Health & Beauty US Quality Low Prices 83.5 -0.2 17 Apart Jewellery PL Look & Feel Low Prices 83.5 – 18 Zafari e Bourbon Grocery BR Quality Low Prices 83.3 – 19 Leboncoin Gen Merch FR Choice Service 83.2 -1.3 20 Decathlon Sports & Outdoors FR BR Choice Online 83.1 0.2 An OC&C Insight Would You Trust a Machine? 02 CONSUMER PROPOSITION CHAMPIONS LOW PRICES VALUE FOR MONEY Rank Retailer Shopper Rating Rank Retailer Shopper Rating 1 Primark 93.5 1 Amazon 86.3 2 Dollar Tree 90.6 2 Farm Foods 84.5 3 Poundland 89.8 3 Aldi 84.2 4 Action 89.4 4 Home Bargains 84.1 5 99p store 89.3 5 DM 83.9 6 Aldi 88.3 6 Costco 83.4 7 Home Bargains 88.1 7 Dollar Tree 83.4 8 Farm Foods 87.9 8 Card Factory 83.0 9 Kik 87.4 9 Yves Rocher 82.9 10 Card Factory 86.1 10 Poundland 81.8 TRUST SERVICE Rank Retailer Shopper